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Betas used by professors: A survey with 2,500 answers

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  • Fernandez, Pablo

    ()
    (IESE Business School)

Abstract

We report 2,510 answers from professors from 65 countries and 934 institutions. 1,791 respondents use betas, but 107 of them do not justify the betas they use. 97.3% of the professors that justify the betas use regressions, webs, databases, textbooks or papers (the paper specifies which ones), although many of them state that calculated betas "are poorly measured and have many problems". Only 0.9% of the professors justify the beta using exclusively personal judgement (named qualitative, common sense, intuitive, and logical magnitude betas by different professors). The paper includes interesting comments from 160 professors. We all admit that different investors may have different expected cash flows, but many of us affirm that the required return should be equal for everybody: That is a kind of schizophrenic approach to valuation. Most professors teach that the expected cash flows should be computed using common sense and good judgement about the company, its industry, the national economies┬┐ However, many professors teach a formula to calculate the discount rate (instead of using again common sense).

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Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/822.

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Length: 43 pages
Date of creation: 09 Sep 2009
Date of revision:
Handle: RePEc:ebg:iesewp:d-0822

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Keywords: historical beta; calculated beta; common sense;

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